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Surviving Ir35 - Step 1

The Intermediaries Legislation, more usually known as IR35, was first adopted towards the start of 2000. When it was introduced, it was supposed to stop workers from avoiding paying tax, and enforce the mandatory National Insurance Contribution (NIC). It would do this by forcing certain companies to pay the same tax as their employees.

This law has become rather disliked, particularly by freelancers, who typically take significant risks in their business. If they have a well written conmtract, then it supports them, and highlights their self employed position. However, if it is poorly written, thenit can undermine them and even fall foul of the dreaded IR35.

The simplest and safest solution is to have all contracts reviewed by an IR35 expert before signing. There are many review providers and the average price is around 120. Given that the review could result in a tax saving of tens of thousands of pounds in an IR35 enquiry, it is a false economy to put off getting a review.

Before you send it off for review, I'd suggest you check some things yourself, just to see if there's anything that you obviously need to change.

1. Does your company bear the financial risks of failure? [Yes = Good]

2. Will sound management profit your company in performing a contract? [Yes = Good]

3. Is your contract specific to you, or does your company have the right to send alternative personnel? [Yes = Good]

4. Will the risk of bad debts be born by your company? [Yes = Good]

5. Does your contract read "Contract for services" as opposed to "Service contract"? [Yes = Good]

6. Are you entitled to sick or holiday pay? [No = Good]

7. Are you in a "master and servant" relationship with your client? [No = Good]

8. Do you have mutuality of obligations with your client? [No = Good]

If you are a freelancer, working from the UK, and everythign listed above checks out for you, then you are likely to be fine in the event of an investigation. However, be careful. It's not just what your contract says that matters, but also how it is written. IR35 investigators look very closely at the precise wording of contracts, so you need to be sure you use exactly the right phrase.

So, the first step in making sure you are completely in the clear with regards to IR35 is to contact an expert reviewer. Get them to take a look at your contract, and sound out anything that might trip you up. Just be sure you get thsi done before you put pen to paper and actually sign it.

Article Source: http://www.articlesnatch.com

About the Author:
This article was provided by the companies Home Loans Direct and Small Business & IR35 Contractor Accountants Antony J. Holdsworth & Co.

Tags: IR35

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